Legal action looms over Credit Suisse bond wipe-out

A multi-jurisdictional team of lawyers from Switzerland, the US and the UK is in discussions with Credit Suisse bond holders.

A call for Credit Suisse bondholders is likely to be convened to take place this week.

Global law firm Quinn Emanuel Urquhart & Sullivan is in discussions with Credit Suisse bondholders about possible legal actions they could take in response to the wipe-out in the value of their bonds as a result of the proposed merger between UBS and Credit Suisse.

The law firm said in a statement it has put together a multi-jurisdictional team of lawyers from Switzerland, the US and the UK which is already in discussions with a number of holders of Credit Suisse’s AT1 capital instruments.

The capital instruments represent a significant percentage of the total notional value of AT1 instruments issued by Credit Suisse.

A call for bondholders is likely to be convened to take place this week at which representatives from Quinn Emanuel’s Zurich, New York and London offices will talk through the potential avenues of redress which bondholders should be considering.

Quinn Emanuel previously helped an ad hoc group of bondholders to pursue various litigations arose out of the resolution of Spanish bank Banco Popular in 2017 that was sold to Banco Santander for €1, with all AT1 and T2 capital instruments being written down to zero as part of that deal.

US class action specialist Rosen Law last week lodged a lawsuit against Credit Suisse – before the deal with UBS – over “materially false and misleading statements” in its 2021 annual report.

Credit Suisse contingent convertible bonds — also known as CoCos, or additional tier 1 bonds — worth around $US17bn were wiped out by Credit Suisse rescue deal, which saw their value written down to zero.

CoCos, a form of hybrid debt that can be converted to equity, rate as the lowest rung of bank debt and can be used to help absorb capital losses.